Online fast fashion has become all the rage as U.S. consumers seem to be spending their money more wisely amidst a surge in prices, opting for value rather than luxury.
The demand for trend-forward apparel at an affordable price has allowed fast fashion to overtake its more luxurious counterparts, increasing the competition among online fast-fashion mass retailers.
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On August 19, 2024, the Shein company filed a complaint in a Washington D.C. federal court against Temu, a brand owned by PDD Holdings.
According to the lawsuit, Shein is suing Temu for pretending to be an e-commerce marketplace where independent sellers can sell their products. Instead, Shein alleges that Temu has total control over every aspect of its sellers' activity, as it vests authority over what products its sellers can list and the prices at which each item should be marked.
In addition, Shein states that Temu infringes on the intellectual property rights of its sellers and prevents them from removing products, even after the products have been proven to be replicating those of other companies.
Shein also claims that Temu is not profiting from its products; instead, it is losing money on every transaction. The company is setting its prices so low that it must subsidize each sale to minimize its losses, which is deemed illegal in the U.S.
When asked for comments on the matter, Shein made the following statement to The Street:
"Temu massively, continuously, and illegally infringes on SHEIN’s rights directly and through its suppliers, who Temu controls. Temu uses deceptive and unlawful tactics, including theft of trade secrets, trademarks and copyrights. SHEIN is confident that evidence will demonstrate Temu’s engagement in infringing activities, which wrongfully misleads consumers, suppliers, and the public."
An endless battle between mass e-retailers
Shein and Temu have been enemies for years, making multiple claims against each other and even taking legal action.
In 2023, Shein and Temu filed a lawsuit against each other, alleging copyright infringement and antitrust violations. Eventually, both parties dropped the lawsuit in October.
Later in December 2023, Temu once again filed a lawsuit against Shein, this time for 'mafia-style intimidation'. The e-retailer claims Shein purposefully sought out personal information about the company's employees and merchants, infiltrated merchant accounts and stole business secrets.
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Shein's controversial practices
However, Shein is no stranger to being sued itself. The e-retailer has been accused of profiting from and stealing other brands' designs and for using unethical labor practices.
Earlier this year, it was sued by Uniqlo for copying its designs and by multiple fashion designers in July 2023 for racketeering and organized crime, to name a few.
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Shein and Temu's similar business models
Temu and Shein’s business models are similar but not identical. Temu sells various Chinese-made goods to its consumers overseas, while Shein has contracted manufacturers, mainly in China, whose products it sells and ships to its global consumers.
Both online retailers have the ability to quickly respond to trends through mass production and sell their products at incredibly low prices.
Shein is a China-based global online retailer with a main focus on women’s fashion. Although a private company, it was valued at around $68 billion in late 2023.
The company has over 74.7 million users annually, of which 13.7 million are from the U.S. Its largest markets are the U.S., Mexico, and Brazil.
This fast-fashion online retailer adds an average of 2000 new items to its website daily. Due to its ability to keep up with demand, it was reported to have overtaken Amazon as the top shopping app in the U.S. in May 2021.
As for Temu, it is owned by a Chinese technology company called PDD Holdings. The online retailer was valued at around $15.33 billion in 2023 and had a merchandise value of $6.62 billion.
The online retailer has 167 million monthly active users worldwide, 50.4 million of whom access the site from the U.S. at least once a month. In May 2024, the site had 213.2 million website visits.
When asked for comments on the matter, Temu made the following statement to The Street:
"The audacity is unbelievable. SHEIN, buried under its own mountain of IP lawsuits, has the nerve to fabricate accusations against others for the very misconduct they’re repeatedly sued for."
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